Square Q2 report: Bitcoin sales exceeded $2.7 billion, a year-on-year increase of about 3 times

Liam Frost
Odaily Planet Daily Translator | Nian Yin Si Tang

summary:
- Twitter CEO Jack Dorsey's digital payments company Square reported total Bitcoin revenue of $2.72 billion in the second quarter of 2021.
- Meanwhile, the company suffered a $45 million impairment loss on its own BTC investments.

Square, the digital payments company led by Twitter founder and CEO Jack Dorsey, revealed that users of its Cash App purchased $2.72 billion worth of Bitcoin in the second quarter of 2021.

"Bitcoin revenue was $2.72 billion in the second quarter of 2021, an increase of about 3 times year-on-year, but Bitcoin gross profit was only $55 million, accounting for about 2% of Bitcoin revenue," Square said in a recently released shareholder letter.

The company's Bitcoin revenue essentially refers to the total value of Bitcoin purchased by its customers during the reporting period. This profit comes from the difference between the total amount of BTC sold to customers and the cost of BTC purchased by Square to facilitate these sales. This is because when users buy Bitcoin through Cash App, Square applies a small margin to "the market cost of Bitcoin, which tends to be volatile and beyond our control." Square also said that Bitcoin revenue and gross profit may fluctuate in the coming quarters due to changes in customer demand or market prices.

“Bitcoin revenue and gross profit benefited from year-over-year increases in bitcoin prices and bitcoin activity, as well as growth in customer demand,” the company noted.

However, Square's second-quarter Bitcoin performance was significantly offset by the crypto market crash in mid-May, when the prices of many cryptocurrencies were halved. In contrast, the company reported a gross profit of $75 million in Bitcoin in the first quarter of 2021 and total Bitcoin revenue of $3.51 billion.

May’s drop also affected Square’s own Bitcoin investments. The company previously purchased $50 million and $170 million worth of BTC in late 2020 and early 2021, respectively. While Square considers Bitcoin to be “an indefinite-lived intangible asset,” accounting rules required the company to write down its BTC investment by $45 million, or a $45 million impairment loss, in the second quarter.

However, Square’s Bitcoin investment reportedly had a fair value of $281 million as of June 30, “which is $127 million above the investment’s carrying value.”

It's important to note that these numbers don't translate into any realized profits or losses until Square decides to sell its holdings.

Square to acquire rising fintech star Afterpay

In addition to its latest letter to shareholders, Square also announced plans to acquire Australian buy now, pay later platform Afterpay for $29 billion.

Square said it has entered into a plan implementation agreement to pay all of the purchase price in Square stock (the agreement allows Square to pay 1% of the total consideration in cash), which is $29 billion based on the closing price of Square common stock on July 30. The acquisition enables Square to further accelerate its payment ecosystem strategic plan as the company is seeking to integrate Afterpay into its Seller and Cash App business units to enable "buy now, pay later" (BNPL) services.

Note: BNPL transactions, also known as installment loans, allow customers to pay bills in small amounts over a fixed period of time, which is actively advocated by global financial companies such as PayPal, Mastercard, Klarna, and Citi. According to the announcement, the integration will enable small businesses to offer BNPL at checkout, which allows Afterpay users to manage their installments directly in Cash App. This will mark a new milestone for Square in meeting consumers' growing demand to get rid of traditional credit.

As part of the transaction, Afterpay's co-founders and senior executives will join Square and help lead Afterpay's related merchant and consumer businesses in Square's Seller and Cash App ecosystems. Square has agreed to a secondary listing on the Australian Securities Exchange (ASX) to allow Afterpay shareholders to choose to acquire Square shares from the ASX or NYSE. Upon completion of the acquisition, Afterpay shareholders will collectively own 18.5% of Square's shares, and the transaction is expected to be completed in the first quarter of 2022.

“Square and Afterpay share common goals,” said Jack Dorsey, Square co-founder and CEO, in a statement. “Together, we can better connect our Cash App and Seller ecosystems to deliver more compelling products and services to merchants and consumers, putting them back in control.”

This article is translated from https://decrypt.co/77429/square-customers-spent-2-7-billion-bitcoin-q2. If reproduced, please indicate the source.